With cattle prices at record high levels and many forecasts projecting relatively high prices for the next couple of years, some producers feel like they can do no wrong.
In times like these, even less-productive cows and mismanaged calves are likely to make a profit. This is a welcome change for cattle producers who typically need to manage production very closely to make even narrow profit margins.
Although profits are “easier” in a strong cattle market, it’s important to remember that higher prices mean that mistakes cost more than when prices are low. Profit margins are briefly increased during the high part of the cattle cycle, but this is also a time when a lot of money can be left on the table through poor management.
Rather than becoming complacent and sloppy, it pays to refine your management to capitalize on higher prices and make sure that more money ends up in your pocket. This basically means following the same approach that you need to follow during low cattle prices – pay attention to the basics!
The Golden Rule. A beef cow should have a calf every year, on-time, without exceptions. It is the producer’s job to set the cows up to succeed by providing proper nutrition and health programs, but if a cow can’t do this job she needs to go. Cows that need extra feed or care to keep up with the herd may pay for themselves when calf prices are high, but they won’t in the long run. Luckily cow prices have been high, so it’s a great to get rid of less productive cows and focus on the cows that produce.
Wean and work calves! Buyers always want calves that are castrated, vaccinated and weaned. These are the animals that can make the transition to the backgrounder or feedlot the easiest. When calves aren’t prepared to be stressed and comingled, they are more likely to become sick and are less profitable. Buyers are less willing to pay good prices for calves that they aren’t confident have been handled well. Interestingly when calf prices are high, a larger percentage are sold uncastrated, not vaccinated or fully weaned. These calves might still be “profitable”, but a lot of money is left on the table when a producer thinks “why bother when calves are so high anyway?”
Watch your inputs. When cattle prices are high, the costs of production inputs increase as well. Feed, fertilizer, equipment, etc. all increase in price and aren’t likely to go down when cattle prices do. When profit margins are high, we can afford to spend more on feed and fertilizer but it’s important to remember that in times with lower prices these inputs may not pay for themselves. Hay is a good example. Hay has been expensive, but the high calf prices have been paying for it. Producers need to remember to work on their pasture and grazing management to reduce their hay needs because when calf prices come down, hay prices may remain high.
Invest in the future. When cattle prices are high, there seems to be a lot more new trucks, tractors and equipment around. There is nothing wrong with these things, but it’s also important to remember to make investments that can increase productivity in the future. This could include infrastructure, fertility and genetics. Facility improvements are always beneficial, but those that reduce labor are likely to be especially valuable in the future. Things like better fencing and cattle handling facilities, storage, etc. can make life easier not matter what cattle prices are doing. Soil fertility is always a good investment and improving pastures can provide benefits for years to come. Good quality genetics are also an investment in the future. Investing in a little better bull when calf prices are high is likely to continue to pay when prices drop, and margins are tight.
Everyone involved in the cattle business hopes that prices remain high and good times continue, but we know from experience that this won’t always be the case. It is important to make the most of the profit opportunities of the present and plan for leaner times in the future. The need to be a good manager is just as important when prices are high as when they are not.
Hopefully this article has gotten you thinking about where you stand and how to best capitalize on this part of the cattle cycle. If you have any questions or want more information, please don’t hesitate to contact the Extension office.
Eric Meusch is a livestock specialist with the University of Missouri Extension. To contact him, call the Dent County Extension office at 573-729-3196 or email meusche@missouri.edu.